Citation:

Abstract:

Using a sample of secured syndicated loans, I explore the role of intangible assets in reducing financing frictions in credit markets. While the predominant managerial and scholarly perspective suggests that intangible assets are not sufficient collateral, I find that eleven percent of U.S.-originated secured loans include intangible assets as loan collateral, and the collateralization of intangibles has significantly increased over the last several years. I hypothesize and find that intangibles redeployability and borrower reputation are positively related to the probability of using intangibles as loan collateral. I further hypothesize and find that collateralizing intangibles has significantly increased the supply of credit to firms. Moreover, loans secured by intangibles are of similar quality as loans secured by tangibles. Overall, the results suggest that intangible assets increase firm value not only in equity markets, but also in credit markets by alleviating financing frictions.